UPDATE 3-Samsung C&T, KNOC buying Apollo oil unit for $772 mln

Wed Nov 30, 2011 4:20am EST

* Samsung C&T confirms biggest deal by Group affiliate

* To pay $772 mln, says source; Samsung C&T mum on price

* At that price, deal is positive, say analysts

* Samsung C&T to hold 90 pct stake, KNOC 10 pct (Adds link to FACTBOX)

By Elzio Barreto and Cho Mee-young

HONG KONG/SEOUL, Nov 30 (Reuters) - South Korea's Samsung C&T and state-run oil firm KNOC are buying U.S. oil and gas company Parallel Petroleum from private equity firm Apollo, in a deal that enables the Samsung Group to expand its natural resources business.

Samsung C&T confirmed the deal on Wednesday, though it would not disclose the price. A source close to the deal told Reuters that Samsung C&T and KNOC agreed to pay $772 million to Apollo Global Management LLC, the massive New York-based private equity firm founded in 1990 by former Drexel Burnham Lambert banker Leon Black.

The acquisition is the biggest deal ever by an affiliate of Samsung Group, South Korea's top conglomerate. The group has traditionally sealed smaller, bolt-on buys.

The construction and trading unit of Samsung Group, which also includes Samsung Electronics, has been in talks for months with Apollo about the takeover.

Samsung C&T plans to own 90 percent of the firm, with state-run Korea National Oil Corp (KNOC) the remaining 10 percent, Samsung C&T said in a statement. It added that Samsung C&T plans to invite financial investors for some stakes in the future.

"Samsung C&T has been looking to delve into the energy business, and acquisition of Parallel is a fruition of such efforts. Though we would have to look more closely at the pricing and such, the fact that it has made such as decision is positive," said Cho Joo-hyung, an analyst at Kyobo Securities.

Byun Sung-jin, an analyst at Mirae Asset Securities, said: "Market had initially speculated the deal would be worth around 1 trillion won, so $772 million sounds comparatively reasonable. I think return on equity on the deal would be around 10 to 15 percent at that pricing, which is OK."

KNOC also confirmed the deal. Apollo declined to comment when reached at its Hong Kong offices earlier.

(FACTBOX on recent M&As by KNOC, Samsung C&T. )

Parallel, based in Midland, Texas, develops and invests in "long-lived" oil and natural gas fields in West Texas and New Mexico, including a shale gas project near Forth Worth.

According to the Samsung C&T statement, Parallel owns eight oil-producing fields and two gas fields, while holding three exploration reserves. Its daily production is at 8,400 barrels, and its total reserve reaches 69 million barrels, it added.

Apollo bought Parallel in 2009 for about $483 million. Parallel was advised by Scotia Capital on the deal, while J.P. Morgan advised Samsung C&T.

MAJOR PUSH FOR RESOURCES

Samsung Electronics chairman Lee Kun-hee urged Samsung C&T to step up overseas resources development, according to a local newspaper in July.

Samsung C&T is beefing up resource business, which currently accounts for a fraction of its total revenue, to boost new growth areas.

Shares in Samsung C&T closed up 400 Korean won at 66,100 won on Wednesday.

Countries including China, India, Thailand and South Korea have been aggressively working to secure long-term supply of raw materials, whose demand is driven by emerging countries' energy-hungry economies.

South Korea, the world's fifth-largest crude importer and second-largest liquefied natural gas (LNG) buy, wants energy companies to supply 30 percent of the country's combined oil and gas imports from projects almost all abroad by 2019, up from 9 percent in 2009, as it looks to increase self-sufficiency.

Apollo had assets under management of approximately $65 billion as of end-September in private equity, credit-oriented capital markets and real estate funds invested across a core group of nine industries. ($1 = 1145.2500 Korean won) (Additional reporting Hyunjoo Jin and Jungyoun Park in Seoul, Stephen Aldred and Michael Flaherty in Hong Kong; Editing by Jonathan Hopfner and Muralikumar Anantharaman)

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